China Auto Dealer Stockpiles Fell in July, Association Says

Average stockpiles at China’s
automobile dealerships fell to a four-month low in July as
carmakers shut their factories for summer maintenance, according
to the state-backed industry association.

Inventory levels fell to the equivalent of 1.7 months of
sales in July, from 1.98 months in June, Luo Lei, deputy
secretary general of the China Automobile Dealers Association
said in a Sept. 1 interview in Tianjin. Average stockpiles may
fall to 1.5 months of sales for the full year, Luo said.

China’s biggest auto-dealer association has said that
carmakers need to scale back their sales targets or sweeten
incentives because the worsening glut of vehicles across the
nation’s dealerships is unsustainable. Rising stockpiles have
prompted dealers to deepen discounts to meet sales targets set
by automakers, according to Pang Da Automobile Trade Co. (601258)

“The industry isn’t in a healthy status,” Pang Da
Chairman Pang Qinghua said in a speech at an auto forum in
Tianjin. “Supply and demand is in serious imbalance.”

Manufacturing unexpectedly shrank in China for the first
time in nine months as new orders contracted and output rose at
a slower pace, signaling the slowdown in the world’s second-
biggest economy is deepening.

China, which surpassed the U.S. as the world’s largest
market for new vehicles in 2009, faces potential overcapacity,
said Chen Bin, head of the industry coordination department at
the National Development and Reform Commission.

The nation’s top economic planner will push forward on
“structure adjustment” and encourage consolidation, Chen said
at the same forum. A further expansion in auto manufacturing
capacity should be linked to the development of vehicles powered
by alternatives to fossil fuels, he said.